Australian Hancock Acquisition boosts GVK Power

GVK power & infrastructure rose by 7% on the Sensex early in the day followed by the announcement of acquisition of the Australian Hancock Group. The company is to acquire majority in 3 coal mines and one of the rail and port projects that were owned by Hancock Group for $1.26 billion.

On theBSEtoday the stock booked a 7% rise at the beginning of the day and reached Rs.18.20. It lost some rise as the morning progressed and fell to Rs.17.70.

According to certain reports, this deal is to ensure continued supply of coal contracts for the acquiring company based in Hyderabad to the extent of 20 million tonnes each year.

Such acquisition that is to be made by GVK shall be carried out with a phased approach. The Hancock Group will receive $500 million as upfront payments and $200 within one year of the deal closure date. The remaining $560 million shall be received only when the projects get completed and such date is expected to arrive around the next year.

The Founder and Chairman had informed the media that the funding of the deal shall come about majorly from debt though equity infusion commitments remain from the PE players. As of now, execution of documentation and tie-ups with banks for funds is under process.

‘Bell the Bull’ says that for those who have the stock, exercising the hold option should be the best deal because the extremely volatile nature of the stock. Fundamentals give a strong picture and prices might rise further, targeting Rs. 21.